John Deaton, a prominent crypto lawyer and U.S. Senate candidate, has accused the U.S. Securities and Exchange Commission (SEC) of causing significant financial losses to small investors with its approach to crypto regulation.
Deaton recently wrote on Platform X that the SEC’s actions have caused retail investors to lose more than $15 billion.
Deaton, who is representing thousands of XRP holders in legal proceedings, claims that the SEC’s enforcement actions are a “gross overreach” and have had a huge negative impact on small investors.
“The SEC’s misconduct and egregious overreach resulted in over $15 billion in losses for small investors. On behalf of the 75,000 small investors I once represented, we do not accept the SEC’s apology,” Deaton wrote.
SEC faces scrutiny for its aggressive regulatory stance
Deaton’s criticism comes as the SEC faces increasing scrutiny for its tough regulatory stance on the crypto industry.
Deaton, who won the Massachusetts Republican Senate nomination, will challenge Democratic Senator Elizabeth Warren in the upcoming November election.
He stressed that he intends to hold the SEC accountable, especially because, in his view, Senator Warren has been reluctant to do so.
On January 1, 2021, I filed a Writ of Mandamus against the @SECGov stating that the SEC had violated 75 years of legal precedent by claiming the token itself was a security.
I pointed out that orange 🍊 groves, condos, chinchillas, digital assets, and even beavers 🦫, had been… https://t.co/N4EVLkNiaR
— John E Deaton (@JohnEDeaton1) September 13, 2024
The criticism of the SEC comes amid a surprising shift in the agency’s stance toward cryptocurrencies.
According to court documents shared by Coinbase Chief Legal Officer Paul Grewal, the SEC acknowledged that it no longer considers cryptocurrencies themselves to be securities.
“The SEC regrets any confusion caused by its previous suggestion that the tokens themselves were securities,” reads this key statement in the SEC’s amended complaint against Binance.
This marks a shift from the SEC’s earlier stance, particularly in the case surrounding XRP, which had been classified as a security.
Deaton has long called on the SEC to provide clear guidance on cryptocurrency regulation, arguing that the agency’s actions are often inconsistent.
He noted that the SEC’s refusal to provide clear guidance on XRP has led to a protracted legal battle.
“I only asked the SEC to respect the law and make it clear that the token itself (XRP) is not a security. Not only did the SEC’s lawyers refuse to do that, they attacked me personally,” Deaton said.
SEC settles with eToro
Meanwhile, regulators recently reached a settlement with trading platform eToro, forcing its U.S. business to stop trading in almost all crypto assets and imposing a $1.5 million fine.
This is a prime example of the SEC’s stepped-up enforcement actions in 2024.
According to a September 9 report by Social Capital Markets, the total amount of fines the SEC has imposed on crypto companies in 2024 has soared to $4.7 billion, a 3,000% increase from last year.
The SEC’s largest enforcement action this year came in June, when a $4.47 billion settlement was reached with Terraform Labs and its former CEO Do Kwon , marking the SEC’s largest enforcement action in the crypto space to date.
Just recently, a coalition of seven US states jointly challenged the SEC’s cryptocurrency regulation .
Led by Iowa Attorney General Brenna Bird, the states filed an amicus brief arguing that the SEC’s attempt to regulate cryptocurrencies is a “power grab” that will stifle innovation, harm the crypto industry and exceed the agency’s authority.
